Key drivers of high USA healthcare spending identified

TUESDAY, March 13, 2018 It's well-known that the United States spends a lot more for its health care than other industrialized nations do.

The new study, by Irene Papanicolas, Liana R. Woskie and Ashish K. Jha of the Harvard T.H. Chan School of Public Health and the London School of Economics and Political Science, uses less pointed language but nevertheless comes to the same basic conclusion: "Prices of labor and goods, including pharmaceuticals, and administrative costs appeared to be the major drivers of the difference in overall cost between the United States and other high-income countries".

To find more about the study Woskie with her team worked on the data comparing USA healthcare with the 10 leading countries which include, Canada, United Kingdom, Germany, Australia, Japan, Sweden, France, Switzerland, the Netherlands, and Denmark.

The reason? Prices are higher for almost everything in the United States.

Contrary to commonly held beliefs, high utilization of healthcare services and low spending on social services do not appear to play a significant role in higher USA healthcare costs.

The US also spend more money on drugs, with each American spending more than $1,443 a year on pharmaceuticals, while others nations spend between $466 and $939.

A large part of this was administrative costs, which accounted for 8 percent of GDP in the USA, more than double the average of 3 percent of GDP. However, on a per capita basis, the U.S. spends much more than any other country: $9451 in 2015, compared to Germany's $5267.

The average salary for a general practice physician in the USA was $218,173, while in other countries the salary range was $86,607-$154,126. Researchers found America spends twice as much on administration as other nations with multiple insurance systems like the Netherlands or Switzerland, Woskie said.

"As the United States continues to struggle with high healthcare spending, it is critical that we make progress on curtailing these costs", said first author Irene Papanicolas, visiting assistant professor in the Department of Health Policy and Management at Harvard.

The study, conducted by researchers at Harvard University, debunks numerous common beliefs people have about why the U.S. spend so much money on healthcare.

Researchers also pointed out many myths regarding why USA health care is so pricey. Life expectancy in the USA was the lowest of all 11 countries in the study, at 78.8 years; the range for other countries was 80.7-83.9 years.

The U.S. had a lower percentage of its population covered by health insurance (90 percent) than those other rich countries, where 99.8 percent to 100 percent were covered.

Although this is true - USA spends a little less on social services than their peers - investigators claim that this is not responsible for the rising health care costs.

One positive - the USA ranked second lowest for smokers - was offset by the country having the highest percentage of adults who were either overweight or obese, the lowest life expectancy and highest infant mortality. In an editorial accompanying the new study, Katherine Baicker and Amitabh Chandra of the University of Chicago and Harvard note that the latest analysis doesn't delve into the qualitative details of health care treatments Americans get compared to people in other countries.

With only 2.9 beds per 1,000 people, the U.S. falls way below other developed countries, especially compared to Japan's 13.2 and Germany's 8.2.

Contrary to popular belief, high utilization of healthcare services and low spending on social services are not the main reasons for the costs and lack of efficiency. The US actually has excellent healthcare for those who have heart attacks or strokes but is below average in avoidable hospitalizations for things like diabetes and asthma. "Global comparisons are very valuable-they allow for reflection on national performance and serve to promote accountability", said first author Irene Papanicolas, visiting assistant professor in the Department of Health Policy and Management at Harvard Chan School.

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